Income Taxes

Significant components of the provision for income taxes from continuing operations are as follows:



	For the Years Ended December 31,
	2012		2011		2010
	(in thousands)
Current:
Federal	$	32,656	$	1,866	$	258
State and local	3,250		74		68
Foreign	963		263		189
Total current expense	36,869		2,203		515
Deferred:
Federal	27,870		42,148		(48,934		)
State and local	1,385		2,032		(3,877		)
Total deferred expense (benefit)	29,255		44,180		(52,811		)
Total income tax expense (benefit)	$	66,124	$	46,383	$	(52,296	)

The reconciliation of income tax expense computed at the federal statutory tax rates to income tax expense from continuing operations is as follows:



	For the Years Ended December 31,
	2012			2011			2010
	(in thousands)
Expected provision at federal statutory tax rate	$	61,104		$	42,991		$	7,062
State and foreign tax expense, net of federal benefit	3,726			2,255			413
Interest and dividend on preferred stock	—			710			1,612
Change in valuation allowance	—			—			(65,248		)
Meals and entertainment	649			469			315
Fines and penalties	84			(36		)	9
Federal credits	—			(103		)	(156		)
Adjustment to deferred tax assets and liabilities	(3		)	(3		)	3,486
Other	564			100			211
Total income tax expense (benefit)	$	66,124		$	46,383		$	(52,296	)

At December 31, 2012 and 2011, the significant components of the Company's deferred taxes consisted of the following:



	December 31,
	2012			2011
	(in thousands)
Deferred tax assets:
Net operating loss	$	83		$	6,234
Deferred loss	—			1,440
Deferred revenue	5,829			5,985
Federal tax credits	—			3,176
Nondeductible accruals	6,744			5,452
Other	1,072			306
Gross deferred tax assets	13,728			22,593
Deferred tax assets, net	13,728			22,593
Deferred tax liabilities:
Capitalized interest	(1,125		)	(2,041		)
Deferred gain	(364		)	—
Fuel hedging	(97		)	(115		)
Accrued engine maintenance	(29,497		)	(10,232		)
Property, plant, and equipment	(3,271		)	(1,575		)
Gross deferred tax liabilities	(34,354		)	(13,963		)
Net deferred tax assets (liabilities)	$	(20,626	)	$	8,630
Deferred taxes included within:
Assets:
Other current assets	$	12,591		$	20,738
Liabilities:
Other long-term liabilities	(33,216		)	(12,108		)

In assessing the realizability of the deferred tax assets, management considered whether it is more likely than not that some or all of the deferred tax assets would be realized. In evaluating the Company's ability to utilize its deferred tax assets, it considered all available evidence, both positive and negative, in determining future taxable income on a jurisdiction by jurisdiction basis.

Based on the expectation of future taxable income, the availability of reversing deferred tax liabilities, combined with achieving sustained profitability, management determined that, as of December 31, 2010, all of the Company's deferred tax assets would be realized in taxable years after 2010. Based on this determination the Company eliminated its valuation allowance, which resulted in a reduction to the valuation allowance of $65.2 million, the recognition of a deferred tax benefit of $52.8 million, and a total income tax benefit of $52.3 million for the period ending December 31, 2010.

At December 31, 2011, the Company had available for federal income tax purposes an alternative minimum tax (“AMT”) credit carryforward of approximately $3.2 million, and net operating loss (“NOL”) carryforwards for federal income tax purposes of $20.8 million. The Company's NOL carryforwards at December 31, 2011 included an unrealized benefit of approximately $3.5 million related to share-based compensation that was recorded in equity during 2012. In accordance with ASC 718, excess tax benefits are only recognized in the financial statements upon actual realization of the related tax benefit, which occurred in 2012 upon utilization of the remaining NOLs and AMT credit carryforwards during the year.

The Company has fully utilized its AMT credit carryforwards of approximately $3.2 million and NOL carryforwards of approximately $20.8 million against federal taxable income as of December 31, 2012. The Company has state NOL carryforwards of approximately $2.2 million which can be used to offset future state taxable income. State net operating losses begin to expire in 2017.

During 2012 the Company recorded a foreign tax credit of $1.0 million against its 2012 federal income tax liability which was fully utilized during the year. Previously the Company deducted income taxes paid in foreign countries in arriving at federal taxable income.

On January 25, 2012, the Company experienced a subsequent ownership change under the principles of IRC §382, as a result of the secondary offering outlined in more detail in Note 3. Although the Company was subject to the limitations of IRC §382 on the utilization of its NOL and the tax credit carryforwards in 2012, the limitation was sufficiently in excess of the tax attribute carryforwards to allow complete utilization during the year.

The Company accrues interest related to unrecognized tax benefits in its provision for income taxes, and any associated penalties are recorded in selling, general and administrative expenses.

The Company files its tax returns as prescribed by the tax laws of the jurisdictions in which it operates. The Company's tax years from 2005 through 2011 are still subject to examination in the United States due to net operating loss carryovers generated in such years. Various state and foreign jurisdiction tax years remain open to examination and the Company was under examination in certain jurisdictions during 2012 the outcome of these audits were immaterial to the financial statements. The Company believes that the effect of any additional assessment(s) will be immaterial to its financial statements.